I have been arguing for years that loyalty programs have little or no effect on genuine customer loyalty and now there are solid data to support that view. Colloquy, the loyalty marketing publisher and consultancy, recently released the results of a survey of 2500 Canadians consumers who were asked to talk about loyalty programs.
Nearly 50% of the loyalty program members said that special treatment is important to them, yet only 7% said that they get special treatment from their loyalty programs. These numbers are reminiscent of statistics that show that a very large percentage of senior executives feel that they are developing relationships with their customers while single-digit percentages of those same customers believe that anything approaching a relationship exists. Why are executives so out of touch with their customers when it comes to emotional connections?
In Canada, extremely large percentages of consumers are members of some form of loyalty program. The Colloquy research indicated that 87% of those surveyed were active participants in at least one loyalty program. The Canadian numbers are likely driven by the wildly-popular Optimum card from Shoppers Drug Mart, HBC Rewards from the Hudson’s Bay Company, and Air Canada’s Aeroplan frequent-flyer program which now has partners across a wide range of industries.
Research results such as these indicate that consumers perceive a ton of value in loyalty programs and use them often to earn rewards. But, they have precious little to do with loyalty. The best Canadian case in point is Air Canada whose Aeroplan program is extremely popular; far more popular in fact than the airline itself, which seems to be on a single-minded mission to disappoint and frustrate as many customers as it can.
So, don’t confuse loyalty programs with loyalty. At the end of the day, these programs drive short-term behavior, not loyalty. Most customers are in it for the points and the rewards that come with them, not because they hold the company in especially high regard.
Do loyalty programs influence customer behavior? Of course they do. But, if you are looking to build long-term customer loyalty, the kind of loyalty that is grounded in an emotional connection, don’t go running off to start a loyalty program. That’s trailing-edge thinking. These programs have been around so long that they are no longer novel.
The special treatment that customers crave and that they don’t get from loyalty programs will have to come from a concerted effort on your part to treat customers well, to demonstrate your interest in them, and to create opportunities for meaningful interaction.